CheckFree’s Carreker Deal Brings It Check 21 Technology, Expertise

CheckFree Corp.'s agreement to buy Dallas-based banking-software vendor Carreker Corp., announced Tuesday, will help extend the bill-payment processor's reach into the business of electronic check image exchange, including the fast-growing remote capture market. It could also position CheckFree to exploit opportunities arising from the possible convergence of the automated clearing house and Check 21 processing systems, observers say. “Carreker seems to have done a better job [than other companies] of thinking through what payment convergence is all about,” says Bob Meara, senior analyst at researcher Celent LLC, Boston. Atlanta-based CheckFree, which holds a strong position in providing electronic bill-payment processing and ACH-origination software to banks, has agreed to pay $206 million to buy Carreker in a deal expected to close by March 31. The deal follows by only a few weeks agreements by accounting-software giant Intuit Inc. to buy Digital Insight Corp., a provider of online-banking services to banks, for $1.35 billion, and ECHO Inc., a card and ACH processor, for $142 million. Like the acquisitions by Intuit, the CheckFree-Carreker deal represents an effort by software companies to take advantage of opportunities created by ACH developments as well as trends in image exchange, particularly remote capture of checks by businesses. For all its strengths in ACH processing, CheckFree needed Carreker's image-exchange technology to fully exploit trends in the electronification of checks, Meara says. He adds that Carreker's consulting division, which accounts for about one-third of the company's billings and advises clients on optimizing revenue, could be at least as attractive to CheckFree. This unit could come in handy as banks?and their vendors–struggle to move beyond aging mainframe systems designed for paper check processing, Meara says. “It could be the consulting business was more valuable to CheckFree than the snazzy technology, which they could have gotten anywhere,” he says. The offer from CheckFree follows a decision made by Carreker's board of directors in June to launch a review of so-called strategic alternatives, including a merger or a sale of the company. Founded in 1978, publicly held Carreker carries a market capitalization of $196 million, placing a 5% premium on CheckFree's offer. The company earned $2.1 million in its fiscal year ended Jan. 31, 2006, on $116.6 million in revenue.